1. The interpretation of a policy of insurance is a matter of law. An appellate court exercises
de novo review in interpreting such a policy. If the terms of the policy are plain and
unambiguous, the appellate court looks to the policy itself to determine its meaning and
the intentions of the parties. Finally, the appellate court evaluates the trial court's findings
of fact to determine if there is substantial evidence to support them. In doing so, the
appellate court does not evaluate the credibility of the witnesses.

2. In a workers compensation case, an employee-employer relationship exists when the
employer has the right to control and supervise an alleged employee's work, the right to
direct the manner of performance of the work, and the right to direct the result to be
accomplished.

3. An independent contractor, on the other hand, contracts to do work according to his or
her own methods, without being subject to the control of the hiring authority, except as to
the results of the work.

4. K.S.A. 44-503(a) does not apply to an individual who is a self-employed subcontractor.
And when, under the facts presented, the self-employed individuals do not employ others,
they are not subject to the Workers Compensation Act at all and, therefore, do not expose
the insurer to any potential liability for workers compensation benefits under its policy.

5. An appellate court reviews the failure of the district court to award prejudgment interest
using the abuse of discretion standard. Under the facts presented, the district court did not
abuse its discretion.

McANANY, J.: The Travelers Indemnity Company of Illinois (Travelers) appeals from the
district court's judgment in its favor against Challenger Fence Company, Inc., (Challenger).
Travelers claims the judgment was inadequate to compensate it for the premium it was due on an
insurance policy it issued to Challenger. Finding no error by the district court, we affirm.

Travelers issued its workers compensation and employers liability policy to Challenger for
the period June 15, 2000, to June 15, 2001. The premium was based upon the following formula
contained in the policy:

"C. Remuneration

"Premium for each work classification is determined by multiplying a rate times a
premium
basis. Remuneration is the most common premium basis. This premium basis includes
payroll and all other remuneration paid or payable during the policy period for the services
of:

"1. All your officers and employees engaged in work covered by this
policy; and

"2. All other persons engaged in work that could make us liable under Part
One
(Workers Compensation Insurance) of this policy. If you do not have payroll records for
these persons, the contract price for their services and materials may be used as the
premium basis. This paragraph 2 will not apply if you give us proof that the employers
of these persons lawfully secured their workers compensation obligations."

The employees of Challenger described in paragraph C. 1. were generally carpenters,
salespersons, and clerical workers. This suit involves persons--here, subcontractors of
Challenger--whom Travelers claims should have been counted in the premium calculation under
paragraphs
C. 1. or C. 2.

Challenger paid $3,511 as the estimated policy premium when it first purchased the policy.
The exact premium for the policy was to be calculated retroactively based upon an audit
conducted by Travelers at the end of the policy period. Following the audit, Travelers issued to
Challenger a premium adjustment notice which Challenger disputed. Challenger contended that
the calculation included Terry Schmidt, Todd Navinsky, and Robert Libel, who were independent
subcontractors and not Challenger employees. When it was apparent that Travelers and
Challenger could not agree on the premium, Travelers sued Challenger. At trial, the court ruled
that Schmidt and Navinsky were subcontractors who should be excluded from the premium
calculation. The court entered judgment in favor of Travelers in the amount of $3,437. Travelers
appeals.

The Premium Calculation

Travelers claims the court erred in excluding Schmidt and Navinsky from the premium
calculation. Challenger claims they were independent subcontractors not covered by the policy.
Interpretation of the Travelers policy is an issue of law which we review de novo. Unrau v.
Kidron Bethel Retirement Services, Inc., 271 Kan. 743, 763, 27 P.3d 1 (2001). If the terms
of the
policy are plain and unambiguous, we will look to the policy itself to determine its meaning and
the intention of the parties. Zukel v. Great West Managers, LLC, 31 Kan. App. 2d
1098, 1101, 78
P.3d 480, rev. denied 277 Kan. 928 (2003). Since the policy relates to workers
compensation
coverage, we must also look to pertinent provisions of the Kansas Workers Compensation Act,
K.S.A. 44-501 et seq., and cases applying them. Finally, we evaluate the trial court's
findings of
fact to determine if there is substantial evidence to support them.

An employee for purposes of workers compensation is "any person who has entered into
the employment of or works under any contract of service or apprenticeship with an employer . . .
. [except for] individual employers . . . or self-employed persons." K.S.A. 2004 Supp. 44-508(b).
In a workers compensation case, an employee-employer relationship exists when the employer has
the right to control and supervise an alleged employee's work, the right to direct the manner of
performance of the work, and the right to direct the result to be accomplished. Anderson v.
Kinsley Sand & Gravel, Inc., 221 Kan. 191, 198, 558 P.2d 146 (1976). An
independent
contractor, on the other hand, contracts to do work according to his or her own methods, without
being subject to the control of the hiring authority, except as to the results of the work. Falls
v.
Scott, 249 Kan. 54, 64, 815 P.2d 1104 (1991).

The various factors the court should consider in resolving this issue are set forth in the
Restatement (Second) of Agency § 220(2) (1957), and are spelled out in Knorp v.
Albert, 29 Kan.
App. 2d 509, 514, 28 P.3d 1024 (2001). However, as noted in McCubbin v. Walker,
256 Kan.
276, 281, 886 P.2d 790 (1994): "The single most important factor in determining a worker's
status as an employee or independent contractor is whether the employer controls, or has the right
to control, the manner and methods of the worker in doing the particular task."

Challenger presented testimony at trial that it did not control Schmidt or Navinsky or
monitor their daily work hours while on any particular job. Challenger did not pay taxes,
unemployment insurance, disability insurance, or provide other benefits to either Schmidt or
Navinsky. Challenger did not set their work hours, nor did it provide them with tools, company
vehicles, or other company workers to assist them in their work. Neither Schmidt nor Navinsky
was paid W-2 wages. Challenger used them as subcontractors to do piece work as needed and
solicited bids from them for the work.

Travelers claims Schmidt's testimony on these matters at trial was unreliable and should be
disregarded. However, we do not determine the credibility of witnesses. State ex rel.
Morrison v.
Oshman Sporting Goods Co. Kansas, 275 Kan. 763, 775, 69 P.3d 1087 (2003). There was
substantial evidence to support the district court's finding that Schmidt and Navinsky were
independent contractors and not employees covered by paragraph C. 1. of the policy.

Travelers argues that even if Schmidt and Navinsky were not employees for purposes of
premium calculation under paragraph C. 1. of the policy, they should still be counted under
paragraph C. 2. because they were "persons engaged in work" for whom the workers
compensation coverage of the policy could apply. Travelers relies on K.S.A. 44-503(a) for
support of this proposition. However, this subsection of the statute concludes with the provision:
"For the purposes of this subsection, a worker shall not include an individual who is a
self-employed subcontractor." K.S.A. 44-503(a). Since that was the status of Schmidt and
Navinsky,
K.S.A. 44-503(a) does not bring them within the aegis of paragraph C. 2. of the policy. Further,
because Schmidt and Navinsky were self-employed and there was no evidence they employed
others, they were not subject to the Workers Compensation Act at all and, therefore, did not
expose Travelers to any potential liability for workers compensation benefits under the policy. See
K.S.A. 44-505.

Hearsay

In the course of negotiating the premium amount, Challenger provided to Travelers
notarized statements from Schmidt and Navinsky. At trial these statements were admitted not to
prove the truth of their contents but rather to show that Challenger had complied with requests
for documentation from Travelers in an effort to resolve the premium dispute. Travelers claims,
however, that once the documents were admitted, the district court erred by treating their
contents as substantive evidence, thereby rendering the statements inadmissible hearsay. To
support this contention, Travelers notes the comment by the district court in its ruling that it was
taking out of the premium calculation "the two that have provided the notarized statements." This
does not establish, or even suggest, that the district court relied upon the contents of the
statements. This was simply the court's way of identifying Schmidt and Navinsky about whom
there was substantial evidence of their independent contractor status.

Travelers argues that the district court must have relied on the substance of the statements
in order to determine that Schmidt and Navinsky had otherwise secured their own workers
compensation obligations. This does not follow. Schmidt and Navinsky had no obligation to
secure other workers compensation coverage since no evidence was presented that they had
employees for whom they might be liable for workers compensation benefits. Paragraph C. 2. of
the policy extended Challenger's premium obligation to "[a]ll other persons engaged in work that
could make us liable under Part One (Workers Compensation Insurance) of this policy." The
requirement that Challenger give Travelers "proof that the employers of these persons lawfully
secured their workers compensation obligations" arises only if "these persons" could expose
Travelers to liability under the policy. Since Schmidt and Navinsky presented no such exposure
for Travelers, Challenger had no duty to prove that they had their own coverage. Thus, it does
not follow that the district court had to consider the substance of the statements admitted into
evidence in order to come to the conclusion that no premium was due under the policy for
Schmidt and Navinsky.

Prejudgment Interest

Finally, Travelers argues that the district court erred in failing to award prejudgment
interest from March 11, 2002, pursuant to K.S.A. 16-201. We review the failure to award
prejudgment interest using the abuse of discretion standard. Varney Business Services, Inc.
v.
Pottroff, 275 Kan. 20, 44, 59 P.3d 1003 (2002). The key requirement for prejudgment
interest is
for money to become due. The lack of a readily identifiable liquidated sum and the lack of a clear
explanation of the significance of the claimed March 11, 2002, date suggest why the district court
was silent on the issue of prejudgment interest. Travelers fails to demonstrate that the district
court abused its discretion in this regard.